An IVA is something that can negatively affect your credit and your life for a long period of time. However, IVA, if done right has the ability to help your life and your finances as a whole. This can help to increase your credit score over a period of time.
IVA stands for an individual voluntary arrangement. This is something that helps you deal with the debt that is difficult to repay at this point in time. This is an agreement that you and your creditors create together. The outline of this agreement will show when and how you are planning to repay them.
This means that you may have the ability to change around payments so that you are not struggling to repay it anymore, or not struggling to live while repaying it. Sometimes, when going into an IVA with a creditor they will take out some of the debt owed. This shows the ability to work with you on their end.
IVA’s Don’t Always Work
IVA’s do not work great for everyone, especially those with not a lot of debt. If you are looking at an IVA as a way to move around a small debt then it will have more negative effects than positive effects, so it is best to stay away. If you do have debt that qualifies for an IVA then you will have to include at least three-fourths of your debt in it.
You will also have to have the money to pay a lawyer or accountant to draw up this agreement which could prove harmful in the long run. These services can be quite expensive so be sure before you choose to do this.
IVA’s are always recorded on your credit report and they always bring your score down. However, if you pay it all off as agreed upon then it has the ability to bring your score back up at the end due to the debt being paid off.
Just as many other negative marks on your credit report, an IVA will stay on the report for 6 years from the activation date. Even if you choose to finish out your IVA earlier than 6 years it will still be a mark on your report until 6 years after the initial start date.
When an IVA is finished the payments may show up as different things on your credit report. If you included multiple debts in your IVA then they will show up as so on your credit report. However, the payment amount will not change, it will just switch names.
An IVA is something that needs to be thoroughly thought out before going into. It can negatively impact your financial life for years if you do not go into it with a plan. Even if your income increases that money will not go to you if you have an IVA open. The extra money will have to be put towards the IVA which is a piece many forget about.
If an IVA is the right choice for you just be sure to pay off the debt as agreed and your credit score will increase once your debt goes down. The IVA will still show up for 6 years though, no matter when you pay it off.